The IRS announced Friday that it is targeting a group of high-income earners and businesses that have failed to pay their taxes in full — including about 1,600 millionaires who owe hundreds of millions of dollars in unpaid taxes.
In addition to high-income individuals, the IRS said it would focus on 75 large business partnerships, which manage an average of $10 billion in assets. These partnerships include hedge funds, real estate investment partnerships, and large law firms, all of which have exceptionally complex tax structures.
Driven by new financing: The Internal Revenue Service said its effort is made possible by the funding it received through the Inflation Reduction Act, which initially provided $80 billion over 10 years to boost the IRS’s workforce and technology, although some of that funding has been reversed as part of the debt limit. deal earlier this year.
IRS Commissioner Daniel Werfel told reporters that the agency has been involved in a significant hiring effort since the legislation was passed last year, and that its expanded workforce has used new artificial intelligence tools to identify wealthy taxpayers who have “cut back” or engaged are in advanced tax avoidance plans.
“This new compliance push delivers on the Inflation Reduction Act’s promise to ensure the IRS holds our wealthiest filers accountable for paying the full amount of what they owe,” he told the Associated Press. “We will increase our compliance efforts for those who pose the greatest risk to our nation’s tax system, whether it is the wealthy seeking to avoid their fair share or promoters aggressively exploiting fraudulent schemes.”
The agency said it has already had some successes, including recovering $38 million in back taxes from more than 175 high-income taxpayers earlier this year.
The political context: Republicans have complained bitterly about that increase in funding for the IRS and have tried to eliminate it almost entirely, in some cases baselessly claiming that the money will be used to hire thousands of armed tax agents who will ruthlessly target innocent families and small businesses. prosecute. The debt ceiling and budget deal reached in June includes a $1.4 billion cut for the IRS, as well as an agreement to redirect $20 billion to other agencies over the next two years.
Friday’s announcement pushes back against that Republican narrative and the related effort to withdraw the additional funding. Highlighting the positive results to date, the agency explicitly said it will “shift the focus to the wealthy and away from working-class taxpayers,” with a particular emphasis on “high income earners, partnerships, large corporations and promoters who break the tax laws of abusing the land.”
However, the announcement is unlikely to satisfy anti-tax activists and their political allies. Grover Norquist of Americans for Tax Reform—a tax-cut advocate who famously said he wanted to deny government funding so it becomes small enough to “drown in the bathtub”—warned that there is always the danger that the IRS will change its policies will change. focus in the future. “This power and these resources allow them to go after anyone they want,” he told the Associated Press. “The next step is to go after anyone they want to target for political purposes.”
Still, the IRS will continue to advocate for its new approach, and Democrats will try to protect what remains of the funding stimulus. “I hope that my Republican colleagues on the House Appropriations Committee will work with Democrats to ensure that the IRS has the resources they need to effectively carry out their responsibilities and serve American taxpayers,” said Steny Hoyer , House Majority Leader, told The Hill.
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